EU Slaps Oil Embargo on Russia With Price Cap, Uncertain Impact
A European Union embargo against maritime shipments of crude oil from Russia went into effect Monday, along with a price cap agreed to by the Group of Seven leading industrialized economies and Australia.
Targeting seaborne deliveries that make up two-thirds of the EU’s crude imports from Russia, the embargo counts among a raft of steadily tougher EU sanctions against Moscow for its war in Ukraine. Some analysts call it Europe’s most significant step to date in reducing its dependency on Russian energy — which is helping fund the war.
European Commission chief Ursula von der Leyen announced the oil embargo in early May, as the weather was becoming warmer, and chances of an energy crunch seemed far away.
“This sends another important signal to all perpetrators of the Kremlin. We know who you are. We will hold you accountable. You’re not getting away with this. Putin must pay a price — a high price — for his brutal aggression,” she said.
Now, as winter sets in, European governments are warning of possible energy shortages — especially since Moscow has sharply curbed exports of its all-important gas.
Thierry Bros, an energy expert and professor at Sciences Po University in Paris, summed up the challenge facing Europe: “We have to think about how can we hurt Russia in a way that hurts us less than Russia.”
The EU previously enacted a less significant coal embargo against Moscow. Along with this new oil embargo, Western nations set a $60-a-barrel price cap for Russian crude exports, hoping to enforce it by requiring the mostly Western-based shipping insurers and others in the industry to abide by it.
Bros is among those who have voiced skepticism.
“Because it’s [oil] a fungible commodity like coal, Russia has the ability to reroute this to Asia and provide it as a discount to India and the Chinese. So, the oil embargo is going to be difficult for us as Europeans, and the oil product embargo is going to be even more difficult,” Bros said.
This coming February, Brussels also enforces a ban against refined Russian oil products such as gas, jet fuel and diesel. Some believe it may prove more effective in hurting Russia’s pocketbook. But Bros points to shortfalls. For example, he said, European vehicles still depend on Russian diesel. Finding alternatives may not be so easy.
Meanwhile, critics suggest there may be wiggle room for cheaters to flout the new crude oil embargo. The $60 cap for Russia’s crude is also controversial for a mix of reasons. Some believe it’s too high.
“I’m very worried that we democracies are trying to fiddle free markets. … Once you do this, you’re putting a risk on free markets. I think it’s wrong to do this,” Bros said.
Russian oil exports to the EU have already fallen sharply this year. Moscow, however, has earned more from its overall oil exports than last year, largely because prices have risen since the start of the war in Ukraine.